Stocks can’t hold on to early gains

Wall Street gave up a big early advance and closed mixed Tuesday after a strong rally in commodities, including oil, stoked inflation fears and helped drive up long-term bond yields.

The Dow Jones industrial average, up as much as 156 points early in the session, ended with a loss of 10.99 points, or 0.1%, at 12,337.22.

The Standard & Poor’s 500 index eased 1.21 points, or 0.1%, to 1,348.78. The Nasdaq composite fell 15.60 points, or 0.7%, to 2,306.20.

Still, winners edged losers on the New York Stock Exchange, thanks in part to strength in energy and other commodity stocks.

Crude oil futures closed at a record $100.01 a barrel, up $4.51, amid a broad rally in prices of raw materials.

Stock market investors had returned from the long holiday weekend in an upbeat mood, but it faded with the jump in commodities, particularly oil, analysts said.

“The big move in oil is having a definite psychological impact,” said Chip Hanlon, president of Delta Global Advisors in Huntington Beach.

Rising raw material costs triggered renewed concerns about inflation. The government today will report on consumer prices in January.

Sustained inflation pressures could make it difficult for the Federal Reserve to continue cutting short-term interest rates to help bolster the economy, analysts noted.

In the Treasury bond market, yields rose sharply as some investors became reluctant to lock in rates at current levels.

The yield on the benchmark 10-year T-note jumped to 3.89%, up from 3.77% on Friday and the highest since Jan. 3.

With energy prices up again, “The inflation news is not looking too good for the long end” of the bond market, said Parham Behrooz, senior portfolio manager with the Tattersall Advisory Group.

The stock market also was pressured by reminders that financial institutions continue to suffer from losses on complex debt securities amid the ongoing global credit crunch.

After seeming to have skirted the worst of the mortgage issues plaguing the financial sector, Swiss bank Credit Suisse revealed Tuesday that it had suspended a “handful” of traders for overvaluing assets and that it would take a $1-billion hit to its first-quarter results.

Switzerland’s second-largest bank said it would still post a profit for the period, but that the mis-pricing of asset-backed securities would lead to a write-down of about $2.85 billion. The company’s shares sank 6.6% in Europe.

Also, British bank Barclays Group, reporting results for the second half of 2007, said it had credit-related losses totaling $3.1 billion last year. But the firm also raised its dividend to shareholders 10% in a sign of confidence. Its shares gained 3.7% in London trading.

Among U.S. financial firms, Bear Stearns dropped $2.77 to $80.02 and Goldman Sachs lost $4.61 to $173.80. JPMorgan Chase fell 42 cents to $42.83.

Among the day’s market highlights:

In the energy sector, BP rose $1.31 to $66.99, Valero Energy gained $2.29 to $60.66 and Apache rallied $2.25 to $108.44.

Rising commodity prices helped boost shares of mining firms. Barrick Gold shot up $2.10 to $49.69, Southern Copper gained $7.50 to $108.89 and Cleveland Cliffs jumped $4.70 to $122.26.

Steel stocks were strong. U.S. Steel rose $2.77 to $106.87. Nucor was up $1.88 to $63.89.

On the downside, fears of a looming price war among the nation’s largest cellphone operators surfaced after three top cellphone operators offered competing unlimited calling plans for $99.99 a month.

Verizon Communications slid $2.49 to $35.34, AT&T; sank $1.99 to $35.89 and Sprint fell 34 cents to $9.23.

The Herzfeld Caribbean Basin investment fund (ticker symbol CUBA), gained $1.26 to $8.70 on news that Fidel Castro had stepped down as the island nation’s ruler. The fund invests in companies that could benefit from normalized relations between the U.S. and Cuba.

Some healthcare issues were strong. Medco Health rose $2.41 to $51.39 after the biggest U.S. manager of drug benefits boosted its earnings forecast and reported fourth-quarter profit, excluding some items, that beat analysts’ estimates as it added customers and sold more generic medicines.

Express Scripts, the third-largest U.S. manager of drug benefits, rose $1.95 to $65.65.

Many tech issues were weak. Google sank $20.69 to $508.95, Microsoft fell 14 cents to $28.17 and Cisco Systems dropped 42 cents to $22.88.